ATLANTA and BOSTON, Sept. 15, 2017 () — Strategic Treasurer & Capital Advisors Group have released results from the 2017 Liquidity Risk Survey. Top survey findings included a growing corporate focus on counterparty exposure and credit facilities, widespread use of uninsured bank deposits, and an overall low priority regarding corporate investment policies.

An overview of the survey results is available at https://strategictreasurer.com/surveys/2017-liquidity-risk/.

Growing Focus on Counterparty Exposure & Credit Facilities

78% of firms were collecting and reviewing their counterparty exposures in aggregate, with the most monitored areas being bank deposits at 61% and credit facilities at 48%. Additionally, 59% of firms had renegotiated their credit facilities within the last year. Craig Jeffery, Managing Partner of Strategic Treasurer, noted the high levels of daily visibility to different types of counterparties as reported by survey respondents, saying, “We see that as a continued positive change, daily visibility, really across all fronts, is becoming a realized goal of more organizations each year.” Craig also pointed out the increased monitoring of credit counterparties, as demonstrated by results that found 85% of survey respondents to be actively monitoring their credit counterparties, which reflected a 7% increase from the previous year.

Overexposed & Uninsured Bank Deposits

40% of firms had no policy limits on uninsured bank deposits and 32% had limits that exceeded $10 million. Noting the wind down of Banco Popular as an example of the need for the recalibration of the idea of ‘too big to fail’, Ben Campbell, CEO of Capital Advisors Group, said, “We hope that there continues to be a migration of investment policy and/or counterparty risk framework to govern bank deposits because I think that the world is significantly changing.”

Low Priority of Investment Policy

Only 23% of firms had made changes to their investment policy in the past 6 months, while 37% had not made any revisions in the past two years. On this topic, Campbell noted that “Due to the higher interest rates and increase in spread of short corporate notes of commercial paper over treasury, there is significant opportunity for investments out on the curve in asset backed securities, high grade corporate commercial paper, and financial commercial paper that wasn’t present 12 months ago.” Campbell also reiterated the importance of investment policy review at least every 12 months by saying that, “If an investment policy has not been tweaked to take advantage of those opportunities, it is a lost opportunity for the company.”

The survey addresses how treasury professionals are coping with multiple developments in the new environment, including:

  1. Debt: Decreasing loan covenants reflect movement towards a buyers’ market, and diversified maturity dates of credit facilities.
  2. Investment: Restricting purchases of specific more risky securities, adding asset classes, and modifying money market fund language to reflect new floating prime funds.
  3. Counterparty Exposures: Increased levels of daily visibility across different types of counterparty exposure, with Bank Deposits and Credit Facilities being the most watched by survey respondents.

About Strategic Treasurer

Founded in 2004, Strategic Treasurer is a consulting firm advising on treasury, financial risk, and risk technology issues. For more information, visit www.strategictreasurer.com.

About Capital Advisors Group

Capital Advisors Group, Inc. is an independent SEC-registered investment advisor specializing in institutional cash investments, risk management, and debt finance consulting. For more information, visit www.capitaladvisors.com.

Press Contacts

Isaac Zaubi
Strategic Treasurer 
(678) 466-2236
176512@email4pr.com

Shane Fierman
Capital Advisors Group
(617) 630-8100
176512@email4pr.com

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SOURCE Strategic Treasurer

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